Act aims to protect consumer

Press, 2 June 1982, Page 28

Act aims to protect consumer

PA Wellington The Credit Contracts Act, aimed at giving consumers a better deal, came into force yesterday. No longer will a car dealer be able to stick a big sign on a used vehicle saying $2OOO, with possibly “dep.” in tiny print. In future he will have to give equal prominence to the full cash price.

This is only one of the sweeping changes coming into force with new legislation. More importantly, lenders in future have to make clear the “true" rate being charged on hire purchase or other loans. A practice has grown up where many people have been badly caught out by thinking that the “flat” rate being charged on a deal is what they'll be paying. Commonly, “true" rates can be twice that of “flat” rates. Some trustee savings banks have been among lending organisations advertising “flat" rates of interest when they should have been giving “true” rates. A number of lawyers’ groups have protested about the legislation in recent weeks. This is in spite of the fact that the Law Society initially supported the legislation when it went before the statutes law committee. Some lawyers say the act is difficult to comply with and unnecessary. The act covers lawyers, who previously were outside the provisions of its predecessor, the Moneylenders Act. Lawyers, who are deeply involved with moneylenders in mortgages;’., previously never had to tell what it was costing to borrow, a Justice Department spokesman said. "They are upset at having to do it now and do not like the provisions that can be enforced if they fail to comply, even though these are not as rigorous on them as for other people,” he said. "Now they're under simi-

lar rules that other people have been for years.” The act removes the necessity for 3500 people who had licences under the Moneylenders Act to apply the courts for registration. Now. instead of the courts issuing licences, anyone can carry on the work of a financier. However, in cases where such a person or organisation is considered to be abusing his position, the court can issue an order preventing someone from carrying on business as a financier. An advantage for the consumer is. that within three days of purchase he can back out of the loan agreement — presumably this means he will choose to pay cash. However, he will not be able to renege on the purchase; he must take the goods he has signed for but not the means of finance offered. The act also gives the courts the power to reopen contracts — say for hire purchase or mortgages — which it considers oppressive.. This means the court can order the revision of terms and conditions in a loan agreement if these are considered unfair to the borrower. The legislation also makes it compulsory for lending organisations to disclose certain basiciinformatipn. which will allow people to compare different options and interest rates. Trading banks have already notified customers that in future they will be stating the interest rate payable on overdraft and for some time credit cards have been disclosing the interest being charged. The act sets out to stop misleading information — making sure for instance retailers give equal prominence to the cash price in a deal as to the deposit. It also allows for the prohibition of disreputable people from carrying on the business of moneylenders. The act has made it necessary for changes to be made to the documentation of all contracts for hire purchase and other credit transactions and has meant that many lawyers for finance companies have been very busy lately. The legislation arises from a wide-ranging report on credit made by the contracts and commercial law reform committee in the 19605.